EmailDiscover Financial (DFS $23.79 +0.20) announced second quarter earnings of $1.09 per share, $0.34 better than the Capital IQ Consensus Estimate of $0.75; revenues net of interest expense rose 4.6% year/year to $1.74 billion versus the $1.71 billion consensus.
Discover card sales volume showed strong year-over-year growth of 9% with $25 billion in volume in the quarter. Total loans increased 5% from the prior year to $52.5 billion, while credit card loans declined 1%. Credit card loan balances grew $644 million, or 1% from the prior quarter.
The delinquency rate for credit card loans over 30 days past due reached a 25-year record low of 2.79% (-206 bps year/year , -80 bps quarter/quarter) and the credit card net charge-off rate declined (355 bps year/year and 95 bps quarter/quarter) to 5.01%. Net interest margin was 9.15%, relatively unchanged from the prior year and down 7 bps quarter/quarter.
Credit card yield decreased 36 bps year/year and 8 bps quarter/quarter. The decline in yield reflects the impacts of the CARD Act and an increase in promotional rate balances, partially offset by lower interest charge-offs. Provision for loan losses of $176 million decreased $548 million, or 76% year/year , driven by lower charge-offs and a reduction in the allowance for loan losses.
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